Vodafone, the largest private mobile phone company in the world, concedes that India is by far the toughest country to do business in. The CEO of its Indian operations, Marten Pieters, tells ET in an exclusive interaction that consolidation is bound to happen as only 3-4 operators can be successful in any market. Pieters says that it is the regulatory and policy uncertainties that have led to the company postponing its proposed initial public offering, and not its multi-billion dollar tax dispute with the government here. The telco is also of the view that most Indian customers are price-sensitive and would, therefore, opt for slower data speeds on a 2G network as it is cheaper to 3G and 4G. Excerpts:

Is India the most complicated market you have operated in?

Absolutely, I wouldn't be aware of any market that is more complicated. China, for instance, has two operators who have been given free spectrum. Sure, they have been told to do rural rollouts, but China has not regulated tariffs. China Mobile is by far the most profitable company in the world. True, the Chinese government didn't get the money, but what they got was real good networks. India's new NTP says by 2020, we need 600 million broadband users. But how will you do that? It needs huge investments.

Do you expect consolidation to kick in?

It's already happening, as we speak. Uninor has shut four circles, Etisalat has stopped doing business.

Is consolidation also triggered by falling returns?

In a market, maximum 3 to 4 mobile operators can be really successful. The UK and Holland saw the 4th and 5th operators disappear. After all, to make money you need that kind of investment. Why would a customer opt for a network with less quality? Most customers see coverage as the number 1 quality criterion. If you invest only half, network coverage will also be half. It doesn't matter if you have 30% or 5% market share; the expense on network coverage has to be the same. It is also a very FMCG-oriented business, so whether you have 5% market share or more, you have to spend the same amount on branding too.

Aren't those expenses a handful for the operators?

Indeed. Those expenses are fairly huge. My experience says if you don't have 50% market share, it is very hard to make money. We have a very interesting situation in India where the top three players have 65% revenue market share. So what are the others making?

Will Vodafone bid for Uninor's assets?

There are at least 3-to-4 players who would love to be part of the consolidation game. But you don't know what you're buying; you don't know what you're selling. It's impossible to tell what you're getting. Even there, we need more clarity. For instance, we hold airwaves in the 900 MHz band in 10 circles. I would love to have that in circles where we don't have it because it's good spectrum. It would be great if I could buy a guy who has that spectrum in an area (where) I don't have. But I also don't know if in two years it will be taken away from me. So why would I buy if I don't know what I have in two years.

Is Vodafone trying to settle the tax issue with the government?

Vodafone has been very consistently saying that it is committed to India. The issue has been there since year one; and we have still invested 50,000 crore during that period. From what I've read, the government is also thinking what to do with this hot potato.

Are powerful rivals making it more difficult?

I hope not. I hope we are moving towards a more level playing field. Let's see over time who plans to invest in the country. Vodafone will be among the top one or two. Why would a country want to mistreat a company like that?

What does this do to the IPO?

The tax issue is not related since IPO is a shareholder issue. But spectrum is very relevant and basic, especially since our licence renewal comes up in 2014-15. So, maybe in theory, it is an idea to do an IPO, but it wouldn't be wise right now.

Will Vodafone stall the 2G auction, given that TDSAT rejected its plea against a clause in the draft guidelines, which mandated operators to pay a market-determined price for converting airwaves they hold into liberalised spectrum for 20 years.

TDSAT has said this is still a proposal, not a final thing, so you can't challenge that till it is final.

What's your take on emerging trends in India's mobile turf?

We don't see a big drop in voice traffic in the foreseeable future. Even in world markets where voice revenue has shrunk significantly, usage hasn't fallen. People treat VoIP services like Skype as a threat, but those have not taken off radically. In India, we have a unique situation where voice calls are so cheap that there isn't much arbitrage in offering it on a different technology. So we expect much of our revenues to come from voice.